2011 PSOY - Heritage Valley Health Systems

2011 Plan Sponsor of the Year

Nonprofit/403(b)

A goal of 100% participation is a lofty goal for a 403(b) retirement plan sponsor, but after moving from 53% to 82% in just four years, the experience of Heritage Valley Health Systems makes it seem possible.

Even more impressive is that the education campaign that resulted in this participation rate had to reach 4,400 employees in more than 60 locations, mostly throughout Western Pennsylvania with some in Eastern Ohio, with shifts that ran 24 hours a day, seven days a week, and some employees working part-time. In addition to the participation rate being above average for a 403(b) plan, the deferral rate is above the national average as well, at 5.8%.

After freezing its defined benefit plan in 2006, the board of Heritage Valley challenged human resources (HR) to enhance its 403(b) plan to create a better opportunity for employees. Laurie Clemens, Director of Human Resources, says the 403(b) had been in place prior to 1988, when it consisted of non-ERISA tax-sheltered annuities from multiple providers. After 1998, the plan became an ERISA-governed plan with mutual fund investment options.

Brenda Maravich, Manager, Human Resources, says Heritage Valley hired Ascensus as recordkeeper and Retirement Resources of Boston as adviser to the plan as part of that challenge in late 2006. The employer match was enhanced to be based on years of service.

According to Maravich, employees are automatically enrolled at a 4% default contribution rate. Participants do not get a matching contribution until after a year of employment, but Maravich notes they are staying in the plan that first year regardless. Clemens says Heritage Valley promotes automatic enrollment as VIP enrollment, stressing that the hospital system does enrollment for participants, making it easier for them.

Defaulted participants are placed in a target-date fund based on age. Also, Heritage Valley makes it simple for participants who want to make their own investment choices by grouping funds by risk tolerance. Employees are given a booklet to help them measure risk tolerance and see a recommended portfolio.

With a mission to help employees meet a more secure retirement at a reasonable age, Maravich notes that the enrollment presentation and materials emphasize the need to target a relevant replacement ratio, since individual participants may have higher or lower needs depending upon personal circumstances. It tells them that Social Security will cover about 40% on average, so they will have a gap, and that the purpose of the plan is to help them fill that gap. Clemens said Heritage Valley began a comprehensive education program with around-the-clock meetings. The HR staff was excited about giving employees the good news about the enhancements instead of presenting bad news about freezing the defined benefit plan. They stressed more control for participants and the new fund lineup, and offered a personalized DVD and enrollment kits.

Maravich says they also educated managers as well so they could help inform employees about the changes during staff meetings. Everywhere employees turned they saw or heard something about the retirement program.

Heritage Valley offers employees an online portal with a specific section just for retirement. The HR staff puts up articles and videos, and they try to update the site quarterly. According to Clemens, when the market went down, they put out education so employees would stay in the plan. Stats show that employees are checking out the portal every day. The HR staff tries to make it fun and easy to understand.

Staff from Retirement Resources is on site at Heritage Valley’s Benefits Fair in the fall. The draw to its table is a jar of money, which employees have to guess how much is in to win. Maravich says almost everyone stops at the table. There were 40 new enrollments and 38 increased contributions this year during the Benefits Fair.

In addition, Maravich says, they have employee meetings with their adviser once a quarter, and the adviser spends one week a year in the area traveling from campus to campus.

According to Maravich, Heritage Valley does a lot of tracking and measurement for the plan and provides visuals to the board. Her staff measures contributions, participation, and plan feature utilization. They also let employees know what they measure.

One measurement that makes Maravich’s staff feel good about the 403(b) program and the outcomes of the last few years is a benchmark survey of employees that indicates the retirement program is one of the areas getting the most positive response from employees. “It solidifies things we are trying to achieve,” Maravich says.

Looking ahead, Heritage Valley intends to roll out life stages education for employees, to focus on what employees should be doing to prepare for retirement in each life stage.

“Thanks to [Heritage Valley Health Systems’] level of persistence and dedication… the retirement readiness of the HVHS employee population has dramatically improved,” says Aimee Pietila of Ascensus.